Market internals moved from bad to ugly this week. There was little bounce after Options Week ended. Then the Federal Reserve basically confirmed that they are not there to prop up the stock market for now.
Today, the SP500 (C fund) is hugging support just above 4300. Once that goes, it follows the non-sp500 (S fund) over the cliff.
When the Federal Reserve flooded the markets with trillions and (illegally) bought corporate bonds and back stopped junk bonds, the small cap fund went vertical. It was all financial stimulus, certainly not economic growth that was the driver.
So as the Fed turns from pandemic-panic to fighting raging inflation, the stock market is on its own. Once over the cliff, the first ledge below will be about where the market was when the Fed’s flood came. Much, much lower.
I recommended to TSP Smart members that our Risk Indicator flipped to SELL last December. Yes, we watched the market put in one more pump higher. But most are happy to be on the sidelines watching at this point.
Why am I telling you this. I really do not want those who serve to be the ones to pay for the follies of wall street and the Fed’s interventions. Count your gains from 2009 and not your losses from the top.
I have no crystal ball on the weekly moves. I just know the historical value based on operations of the SP500 would be below 2500 and the next support level is somewhere in the 3000-3400 level.
It’s much easier to digest what I am saying when you read my market commentary and updates more often. But here it is in free form. Because it pisses me off to read all the buy & hope posts on forums and from investment firms and those dangerous Lifecycle funds.
If everyone sold together the market would simply crash… no buyers, all sellers. You have to move early.. not first, but before the real pain sets in. And watch for market internals to improve before jumping back in.
Invest smart, stay safe
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